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NEW DELHI: Heaving a sigh of relief over the government's decision to extend reduced excise rates till December 31, auto industry today welcomed the move saying it would help the sector overcome the prolonged demand slump.

"It will be good for the auto industry. The momentum that has been built in last few weeks will continue," Maruti Suzuki India Chief Operating Officer (Marketing and Sales) Mayank Pareek told PTI.

Expressing similar sentiments, Honda Cars India Senior Vice-President (Marketing & Sales) Jnaneswar Sen said: "The industry has had a tough couple of years. We had just started seeing some rays of hope last month and with this extension of the reduced excise rates, we can look forward to building the momentum."

He also said the announcement from the government clears the uncertainty of what will happen after June 30 deadline "and is a much needed support to the industry from the new government".

While the Budget is slated to be presented on July 10, in the Interim Budget in February, excise duty on small cars, scooters, motorcycles and commercial vehicles was reduced to 8 per cent from 12 per cent.

It was reduced to 24 per cent from 30 per cent in the case of SUVs, 20 per cent for mid-sized car from 24 per cent and 24 per cent for large cars from 27 per cent.

The reduction in excise duty, given to the auto sector with an aim to give some impetus to sagging sales, is applicable till June 30 which has now been extended till December 31.

While welcoming the development, General Motors India Vice-President P Balendran said: "We hope government will extend it for the full year in the Budget as the sector continues to be sluggish. We also expect government to announce other measures in the Budget to revive the growth."

Society of Indian Automobile Manufacturers (SIAM) Executive Director Vishnu Mathur termed the development as "a big relief for the auto industry,".

Commenting on the development, a Tata Motors spokesperson said: "The excise reduction was a positive step for the automobile industry and we are glad to see it extended as it will help the industry while we await other significant policy decisions to revive the economy."

India's automobile industry has been struggling from a prolonged market slump. Car sales in India fell for the second consecutive fiscal in 2013-14 with a drop of 4.65 per cent at 17,86,899 units as compared to 18,74,055 units in the previous fiscal.

In 2012-13, car sales in India fell 6.69 per cent, the first decline in a decade.

However, in May, snapping two successive months of fall, car sales in India grew by 3.08 per cent riding on positive sentiments over formation of a stable government at the Centre and lower excise duty in the interim Budget.